Hawaiian Telcom revenue rises 2 percent on strong video, broadband gains

Hawaiian Telcom (Nasdaq: HCOM) reported that gains in broadband and TV subscribers drove up Q2 2013 revenue 2.4 percent year-over-year to $97 million.

Video service revenues grew to $2.9 million, while broadband revenues grew to $9.8 million during the quarter.

"We successfully executed on our goal to expand the reach of our enhanced broadband network to 100,000 households on Oahu by the second anniversary of our commercial launch of Hawaiian Telcom TV," said Eric K. Yeaman, Hawaiian Telcom's president and CEO, in the earnings release.

It has set some ambitious broadband and IPTV extension targets. By the end of 2014, the service provider said it plans to reach 250,000 homes with 25 Mbps and IPTV service. 

In addition to consumer services, Hawaiian Telcom said that revenues from its acquisition of Wavecom helped to "more than offset the impact from a 2.1 percent decline in access lines."  

The service provider generated net income of $4 million, or 36 cents per diluted share for the quarter, down from $5.5 million or 51 cents per diluted share in the same period a year ago. It attributes the decrease to a one-time $3.7 million loss on early extinguishment of debt, a $2.5 million increase in depreciation and amortization, and a $2.5 million deferred tax provision, which was partially offset by a one-time $6.5 million gain from the sale of property on Oahu.

Here's a breakdown of the telco's key metrics:

Consumer Revenue: Consumer revenue rose 1.5 percent year-over-year to $34.8 million due to growth in its IPTV service. The telco said that the ongoing build out of its higher speed broadband network, which can support a range of speeds from 7-50 Mbps, is driving video and broadband revenue service growth. This was the fourth consecutive quarter of year-over-year growth in consumer revenue.

Video service revenues were driven by the addition of 7,200 new TV subscribers to reach a total of about 13,600 subscribers at the end of the quarter. Hawaiian Telcom TV average revenue per user (ARPU) rose about 12 percent year-over-year. During the quarter, the telco enabled an additional 17,000 households with IPTV, increasing the total number of households enabled with IPTV to 100,000. 

Driven by High Speed Internet (HSI) pull-through rates from new video subscribers and standalone HSI subscriber additions, consumer HSI subscribers grew 4.3 percent year-over-year to about 89,700. As of the end of June, about 54 percent of all video subscribers purchased a triple-play bundles and another 88 percent subscribed to a double-, or triple-play bundle. The increase in IPTV and HSI subscribers were partially offset by declines in legacy consumer access and long distance lines of 8.6 percent and 7.2 percent, respectively.

Business Revenue: As a result of its Wavecom acquisition, Hawaiian Telcom's Q2 business revenue rose 7 percent year-over-year to $42.6 million. It also reported a $0.7 million year-over-year increase in equipment and managed services revenue and higher demand for IP-based data services. However, these increases were partially offset by the year-over-year decline in legacy business access and long distance revenues.

"In the business channel, we continue to see growth in our IP-based services, driven by a 34 percent year-over-year increase in business data revenue, including revenue from our Wavecom Solutions Corporation subsidiary acquired in December 2012," Yeaman said.

Wholesale Revenue: Wholesale revenue declined 6.6 percent year-over-year to $16.5 million. Likewise, wholesale carrier data revenue declined $0.6 million year-over-year to $14.8 million, due to the elimination of previously recognized revenue that related to services provided to Wavecom. Finally, switched carrier access revenue declined $0.5 million year-over-year to $1.7 million, which Hawaiian Telcom said is related to the overall declines in access lines and minutes of use, and the impact of intercarrier compensation reform.

A big growth area in Hawaiian Telcom's wholesale unit is wireless backhaul. The service provider has connected 252 cell sites to its fiber network and has 180 additional sites under contract to build. It is also currently pursuing over 40 additional sites.

Shares of Hawaiian Telcom were listed at $27.25, up 4 cents, or 0.15 percent in Monday pre-market trading on the Nasdaq stock exchange.

For more:
- see the earnings release

Special report: Wireline telecom earnings in the second quarter of 2013

Related articles:
Frontier, FairPoint, others find new wholesale life with wireless backhaul
Hawaiian Telcom secures $300 million loan to reduce existing debt
Hawaiian Telcom to reach 250,000 homes with 25 Mbps, IPTV by end 2014
TDS, Bell Aliant and Hawaiian Telcom boast subscriber gains in Q1, driven by IPTV success
Hawaiian Telecom's broadband, TV gains drive Q1 revenues to $96 million

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